The Minister in China (Reinsch) to the Acting Secretary of State

No. 2548

Sir: I have the honor to report that a great deal of discussion has been aroused by the loan of Yen 20,000,000 contracted last year with the Japanese for the War Participation Bureau which has now been re-named National Defense Bureau. A great deal of dissatisfaction resulted when it became known that Japan was continuing to supply the National Defense Bureau with arms and ammunitions and that under the Yen 20,000,000 loan, a monthly payment of Yen 3,000,000 was to be made. The Bureau is in charge of General [Page 300] Tuan Shi-jui and his lieutenants, General Chin Yun-peng at present Minister of War and General Hsu Shu-chen, who is General Tuan’s chief lieutenant. As the opposition of General Tuan to the idea of peace by negotiation is well-known and as it is believed by the leaders of Central and South China that he is simply preparing a force for the purpose of again taking up hostilities, the public was considerably aroused by what seemed action designed to obstruct the Peace Conference and to defeat its aims. These apprehensions are expressed in a letter from Tang Shao-yi to the British Minister, as Dean of the Diplomatic Corps, copies of which are herewith enclosed.21

The attitude of the Japanese Government on the matter of continued support to the Northern Military party was reported on in my despatch No. 2446, of January 10th,22 forwarding a memorandum of a conversation with the Japanese Minister. At a meeting of the Allied Ministers on February 12th, the matter of the National Defense Bureau came up for discussion. The British and French Ministers and myself took the view that the continued recruitment of troops constituted a disturbing element in the situation and acted as an obstacle to the realization of peace and that, therefore, the supplying of money for this purpose was not desirable. The Japanese Minister stated that he should not be able to say anything to the Chinese Government without previous instructions; and that he was also waiting for an answer to his inquiry whether the Chinese Government desired to have the payments under this loan continued. It is, of course, known to all that the present Cabinet is dominated by the military clique and would, therefore, not be in a position to take independent ground on this matter.

As will be seen from the enclosed despatches and newspaper articles21 a great deal of agitation was going on meanwhile. On February 21st, the Japanese Minister called on me and stated that under instructions from his Government, he desired to inform me that it had been decided no longer to furnish ammunition and equipment to the National Defense Bureau but that the Japanese Government felt that it could not stop the payment of the Yen 20,000,000 loan. Mr. Obata stated that this money had been paid into Japanese banks for the use of the Chinese Government; that the Chinese Government could insist upon payment and that the banks could not refuse, short of bankruptcy. When I asked him whether the money was so entirely the property of the Chinese Government that it could immediately draw out the entire amount, Mr. Obata stated that he believed that there was an arrangement that they [Page 301] should draw only Yen 3,000,000 a month. The property of the Chinese Government in these funds must therefore be qualified only.

Today the report is received that the Japanese Government has decided to stop the payment of this loan. It is known that Tang Shao-yi made a direct appeal to the Japanese Cabinet on this matter.

In addition to the enclosures in the despatches herewith forwarded, I also beg to refer to enclosures forwarded by the Shanghai Consulate General on February 5th,23 File 710.

I have [etc.]

Paul S. Reinsch
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  2. Ante, p. 291.
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